Building Market Leadership: How Growth Drives Business Valuation

For you as an entrepreneur, would you rather have that million dollars in your pocket or would you rather invest that million dollars if you know that it will come back to you in the future, likely with a fairly significant return on investment? Entrepreneurs are driven by the vision of scaling their companies and achieving higher returns and in many instances looking at a high valuation or a higher valuation to exit. We've talked about the reasons, a few of the reasons why growth is important and, and investing in ourselves and in our business is important. Would you do that or would you not? Good day and welcome to the Wealthy Entrepreneur Podcast. I'm your host, Bob Goverau. It is great to have you with me today. I just want to remind you that on this Wealthy Entrepreneur podcast, this is really the place where we dissect the elements that contribute to entrepreneurial success, from mindset and leadership to profits and revenue. And I want to talk to you guys a little bit today about something. I've got this CEO group that we have inside our Wealthy Entrepreneur coaching program and we had the opportunity to collaborate last week or maybe the week before. And as CEOs we get together once a month. We talk about some of the challenges. I definitely shared my expertise and insights from growing an eight figure business and other CEOs are contributing and participating and helping solve problems with others as they've realized. I'm super powerful to have a group of people that are able to collaborate and share insights together. And the topic that we chatted about this past month was around the the idea of why entrepreneurs invest in growth, even though it hurts. And I led this discussion because over the last few years for sure, we've aggressively invested in improving our firm, in improving our business. And that investment comes with additional salaries. It comes with additional marketing spend. For us, it's a business development team and likely lead generation, being at events, just getting more and more well known and also creating people in part of our community that eventually will need our support if they don't already already. And so it's really, you know, one of those things is it's really challenging to invest in this growth because it's very costly. And I know for me alone in 2024, I've invested over a million dollars in growth and now that growth could be in my pocket. And so the question is, for you as an entrepreneur, would you rather have that million dollars in your pocket or would you rather invest that million dollars if you know that it will come back to you in the future, likely with a fairly significant return on investment? So for example, for Me, you know, that that million dollars in growth that we've reinvested in outside of of people and bringing on new employees, but just investing in growth and business development, it's likely contributed about $3 million in value as part of that investment. So super powerful, it can be calculated right. But in the short term, pulling that million dollars out of the cash flow of our business can be super painful. You know, if some of those investments aren't returning the way that we want them to, super painful cash flow becomes a challenge. So one of the, one of the discussion points was around, why do we do this to ourselves? You know, would you choose to maintain the status quo and milk as much profitability out of the business as possible for, for take home, or would you invest in growing? And what we did is we came out with some ideas as to why someone would invest in this growth. Because truthfully, you know, investing in this growth helps quite a few things. It improves our market share, which makes our organization stronger. It improves our competitive advantage. It improves the value of our business. Growth often signals to investors and customers and partners that business is thriving and can lead to greater opportunities. Despite challenges, entrepreneurs are driven by the vision of scaling their companies and achieving higher returns and in many instances, looking at a high valuation or a higher valuation to exit. So would you. Now that we've talked about the reasons, a few of the reasons why growth is important and investing in ourselves and in our business is important, would you do that or would you not? And for me, these were a couple of the areas that I felt like the reason I invest is so important. So number one is the vision and purpose of our organization. So our organization, our mission and our vision is to empower entrepreneurs with good information so that you as entrepreneurs can change the world. And for me, that investment in continuing to grow, to get access to new markets, to continue to offer additional services, that's something that's aligned with the vision of our organization. We're investing in helping more people. By helping more people, we're empowering more entrepreneurs to be able to make positive change. So for me, even though it's painful, investing in growth is so very important because it's aligned with our vision for our organization. So I think, you know, that that would definitely be one. If I wasn't investing in it and I was milking all of the money out of it, I'd be having this major conflict of why I'm actually in this in the first place. The second sort of area is, you know, competitive advantage and strategy and, you know, Failing to continue to grow in your market can lead to falling behind. And investing in growth ensures your company stays relevant and maintains an edge in, in your space. It captures attention, it makes it interesting, it allows, it allows you to have access to better people because they're excited about what you're doing. You know, our industry that we're in overall is fairly flat. It would be growing at less than inflation. And for us, we're up 34% in revenue growth this year, which is organic and it's powerful because people are excited to want to join our organization. So I also like the idea of having something that's exciting. I don't want it to be boring. Even though we labeled this year our boring year, boring meaning consistency, systems, processes and delivering was, was our goal for 2024. Another reason that we want to essentially increase the growth and continue to invest in the growth is the increase in business valuation. We talked about this in the past, but 80 plus percent of business owners feel like their big payday is going to be when they exit their business, but they never are able to. 80 plus percent of businesses are never able to sell their business predominantly because it doesn't have value outside of themselves. And so continuing to grow, continuing to invest in growth is powerful because it's building a team, likely because the more that you're needing to deliver, the more people, people, resources that you're going to need to support that delivery. And while you're doing that, it's building a team around you, one that is sustainable without you. And I know so much about the idea of getting in the way. You know, my biggest challenge is me in wanting to still deliver for everybody. You know, my heart and soul wants to deliver for everybody, but my time is better spent helping support the people that deliver for everybody. So continuing to invest in growth, increase the team, creates a business that operates without me. Although I'm supporting and I'm still a heavy component, if not the primary driver in strategy, you know, looking at this and it increases the valuation. One of the eight value drivers of creating a business that can scale and exit successfully is, is eliminating the dependence on the owner. So we have to constantly be thinking about that how are we going to eliminate the dependence on us as an owner unless we're investing in growth. So yes, it might be a short term pain, but the long term pain is not being able to exit and not being able to transfer the impacting machine that we've created, which is our business, transferring that to somebody else. So super important that even though, yes, it Might be costly and it might be painful in the short term because we break things and we need to fix them. Ultimately in the long term, it's going to decrease the pain because we've created something that is sustainable without us. Super important. Two more areas where I feel like are driving us as entrepreneurs to continue to invest in this growth instead of milking the profits out of our organization. You can clearly tell which side I'm in. But the, the fourth area is around economies of scale. And as our company grows, it can actually lower the costs and produce efficiency. So if we're buying more, then we can save cost, which gives us more profit margin, which allows us to maybe reinvest more. And that's all about the game I'm in right now. I don't need to take out more money personally. I need to create more cash flow and more net income so that I can invest in more people and more skilled and specialized people so that we can continue to bring this to the market and help more people, because that aligns with our vision and our mission. And lastly, you know, investing in growth, as much as it is maybe painful upfront, it does allow us to continue to act in a space of market leadership essentially that allows us to make it harder for competitors to catch up, to compete with us as well. You know, you want to, you want to make a huge impact, you want to help more people, you want to do what it is that you do. You want to be the leader in your industry, you're going to have to invest in growth. You are not going to be a leader in your industry if you do not grow. You might be the leader right now, but people will invest in this growth and they will take you out. I had an interesting conversation with my son a few years ago, who is now 16, getting ready to start to choose where he's going to go post secondary school education. Very strongly considering getting into entrepreneurship. He likes the finance side of things, so there's a chance that we might have a next generation coming up through this. But you, you know, when I first chatted with him, I said, you know, what do you want to do when you grow up? And this is when he was maybe six or seven years old. And when he was six or seven years old, he said, I think I want to be an accountant, dad. And I said, well, that's great, buddy, I love that. And I said, you know, it's great because I've created this fantastic business. I'm super proud. I would love you to be part of it. And he Goes, no, dad, I don't want to be part of a business. I want to build my own like you did. And there was a moment of such pride that was inside me also, you know, being a dad, protecting, wanting to protect him from the pain that you go through in building your own business. And I've now, I've since reflected on this and I would maybe change my opinion, but I did say to him, we got to be ready because it's going to be hard. And he said, well, what do you mean? I said, well, because you're going to have someone like me who's got a team of 110 people, multi eight figure business, lots of resources to invest in people, marketing resources, I've got lots of resources within my organization that I can redirect as needed. And I said, you know, people like me will try and take you out. And he looked at me with big eyes and I said, well, I'm not going to take you out, but I just mean like there's going to be larger competitors that are there, that are going to invest there. They don't want you to enter their market. You know, you are a pain for them and they're going to want to eliminate you because you're increasing competitiveness and that's causing them to be more price sensitive. It's causing them to have a better client experience. Competition really creates greatness in entrepreneurship, but larger organizations have more resources to take you out. And I said, so you gotta be prepared for that. And he kind of, his eyes lowered and I said, you know, I will always be there to support you and I'm happy to be your coach as you continue to grow your own firm. I said, but logistically, unfortunately buddy, you have to go article somewhere for three years, so you might as well do it with me and I'll teach you everything I know and then you can go do your own thing. So, but looking at investment and growth as a pain, but saying, you know, we want to continue to be a leader in our market space, we're going to have to invest because others will be. If you're not willing to, others will be and they will become the leader in the space. Now I don't want to just talk about reasons why we invest in this and some of the pain that it does cause, right? It causes cash flow pain, it causes working more hours, it causes challenges with onboarding, new employees, new customers. You know, we're constantly, things are moving at a fast pace and our systems are constantly being challenged and need to continuously improve. But What I wanted to provide is some ideas for you in how we can focus on eliminating some of the pain of growth. And so I've got seven different ways that I feel focus on these. We're going to be able to minimize the pain that's associated with the growth that we're focused on. So the first one is focus on prioritization. Growth can certainly be overwhelming, we know that. But by focusing on a few key growth initiatives, we can avoid spreading ourselves too thin. Now, one of the ways that we can continue to focus on prioritization, and I know with, with our team, you know, we've got growth initiatives, we've got a bunch of different service lines, but if we focus on one specific area, one specific growth line, and it takes our attention, we can identify the lowest hanging fruit in all of the options. Entrepreneurs, we always have ideas, we've got tons of ideas of new things that we can do to make it better. But let's find the one or the top three that are the lowest hanging fruit that are going to take the least amount of time, the least amount of resources to have the greatest level of impact. So focus on prioritizing one to three of those items. Instead of being the entrepreneurs that we are that all of a sudden see a squirrel in a different direction, focus and prioritize on the lowest hanging fruit that will make the greatest contribution to our growth and our success and minimize our resources and maybe our time as well. The second effective solution I feel to overcoming some of the pain is building a strong team. So I have to tell you now, my team is strong. We are as the strongest we've ever been. I've got the most amazing people who are part of our team and as part of that, they're willing to take on responsibility, they take on ownership, in fact, own it is one of our core values. So people are taking that on, they're buying into who we are as an organization. And because growth really requires talent. And if you're having to do everything yourself because you don't have competent enough people, that's going to be a great challenge for you. So bringing in the right people who can take ownership over some of this growth and some of these initiatives. And so maybe you come up with the idea, you bring in the resources, you reinvest in the resources, and the right people, they can deliver it for you. So it minimizes some of the pain related to growth. Number three. So again, this is ways that we can overcome the pain of investing in growth. The third one is seeking mentorship. Now this is not a new phenomenon. And if you're listening to this podcast right now, you're invested in your own growth. You've created your own business. You know that there are people who have gone and walked the path that you have before. Unless you're 100% a Pioneer, even if you're in a different space. There's been other CEOs, there's been other innovators who've grown businesses, who've invested in people just like we have. And seeking mentorship and finding somebody who's accomplished what you want to accomplish is so powerful. Right? And that's why we created the Wealthy Entrepreneur Coaching program. And I'll make sure that there's a link, a link to that program here. Because not only do we have a group of peers who are also investing in growth and we're realizing some of the challenges and how to overcome those together, but if you're looking to build something like I have with an eight figure business and a business that can operate without me, one that we're going to be able to successfully exit from, then you need to seek a mentor, maybe someone like me, maybe some of the people in our group that we have access to. Mentorship. And finding people who've done what you want to do is so powerful because they've already walked the path, they've already had, had the failures. They can provide advice and guidance on how to get there faster. So you want to minimize the pain of growth. Invest in a mentorship that allows you to learn all of those skills really quickly so you don't have the failures along the way and have to invest in those. Number four. And this one is important. And this is also something that we focus on inside the Wealthy Entrepreneur Program is, is embracing a growth mindset. You know what? There are so many. I watched Warren Buffett, I watched a video of Warren Buffett today, and he's talking about, actually, this is a good little side note here. He was talking about the fact that the world is full of negativity and people who want to give up and people who don't want to try. And he said, find the five people in your life that you respect the most and grab the top five characteristics of each one of them, things that you admire. And then take those items, modify it down to five in total, five characteristics of what you admire about these successful people in your life that you respect and love and appreciate. Take those five characteristics and focus on those for you. Because we can change how we think, how we approach things. We can change our Work habits. This is all embracing a mindset of positivity, growth, hard work. Right. You know, there's another area where I saw a social post the other day and it ultimately said something about, you know, working hard create a lifestyle business where you don't have to work very hard. And part of a lifestyle business, I think is a bit of a crock, if I'm being honest. If you're willing to just take a business and maintain status quo, it's still hard. You're going to have to reinvest, you're going to have challenges, you're going to have competition. So if you're going to do that, why not work harder? And you know, I put a post out that said just imagine the power of a combination of working smarter while working harder and choosing something that you're passionate about so that working harder isn't like work. It's part of something that you enjoy and something that's meaningful for your life. But focusing on positivity, focusing on growing as a mindset, you know, thinking that we want to continue to become better. You know, there's a lot of people who feel like they're entitled, that money should just come to them, that success should just come to them without putting in the effort, without learning. There's so much knowledge out there, you know, inside our wealthy entrepreneur program, we've got thousands of hours of trainings and teachings from experience along the way. You know, access to that information is easy. But those people who are not willing to invest in that time, in that energy, in the resources, not willing to become that positive mindset, person of growth, how they could become better. You know, investing in yourself is so important. So embracing a growth mindset is something that is going to be necessary if you want to grow. Because if you're not adapting to a growth mindset, growth is going to be extremely painful because it's costly. And if you don't believe in it, it's going to chew you up and spit you out. Number five is maintaining financial discipline. So, and this is what I call blowing the wind, blowing from the west versus the East. We want to make sure that if we're investing in growth, that we are predicting what that looks like. We need to have very calculated targets in order to be able to invest in this growth. And we have to make sure that we stay on track. Because if I spend a million dollars in growth this year and my business doesn't make a million dollars, then I'm going to be in real big trouble, right? Because now I'm Going negative, I'm going backwards, and it could be financially costly for me in the long term, so. And it could ultimately end. And your business, you know, 82% of businesses that fail, fail because they run out of cash flow, cash resources. Not because they're not growing, but because they didn't have the financial discipline. They weren't tracking their growth, they weren't tracking their metrics, they weren't tracking their results. If you want to be successful in growing your business and reinvesting in it, you better be damn sure that you're tracking the results, the outcomes, and the benchmarks. So, anyway, that is going to be very important for you, number six. These are all very important. To be honest, this is one that I take very seriously. I take it very serious to the point where I invest in this as well, to make sure that I'm staying on track. But number six is managing stress and mental health. You know, a lot of people ask me, what do you do, Bob? You know, like, you, you invest in growth pretty heavily. You're pretty committed to, to creating and fulfilling this vision of empowering all entrepreneurs. You know, you invest hard. What is it that you do mentally and to prepare and to deal with these adversity that comes with growth and change and conflict and failures. And honestly, for me, listening to some type of motivational video, like Overcoming Challenges, listening to motivational speakers, that works for me, right? That's one. One element. The other element that works for me is physical fitness. So I invest in a trainer. I go to my trainer. At least I go to my trainer twice a week. Unless I'm traveling with business, I go to my trainer twice a week, Tuesdays and Fridays, and in between, I need a couple other gym sessions as well. So I try and go at a minimum twice a week with my trainer, but up to four or five times a week. Why? Because if I'm not exercising, getting my blood flowing, getting my, you know, pushing my muscles to try and push myself to the next level, to become a better fit, physical version of myself, My mental health won't be there. My energy won't be there. And one of the reasons that I have success in leading my team is because I have energy. In fact, we have shoutouts that happen every single month, at least once a month. And a lot of people aren't shouting out the CEO because they don't want to see, you know, don't want to feel like that feedback is, you know, trying to get any sort of personal prioritization from kissing butt or anything like that. But I got one, you know, this past month because we've been working so hard at, at multiple events and I've been speaking a lot and one of our team, you know, a senior level person of our team said, you know, Bob, I don't know how you do it, but you show up with so much energy and passion every day. It's so infectious. Shout out to you for all that you do and all you bring to the team with this. And you know what, that meant a lot to me. And the reason that I'm able to do that is because I focus on keeping my growth mindset in the right place, focusing on my mental health, listening to the things that I need to listen to to get me in the right space. Plus exercise, physical activity that's going to keep me physically ready for the demands of, of growth because again, it is super challenging. And lastly, my last tip of seven here on why or how we mitigate the pain of growth is leveraging technology. So one of the things that we've been talking about a lot lately is how we use automation for processes, tools, even systems and tracking. You know, we use HubSpot as a CRM platform, tracking all of our marketing data, all of our new contacts that we're making, making sure that nobody gets missed, making sure that we're constantly following up on the conversations that we're having. You know, using automation to make sure that we're, we're connecting with people, with everybody. You know, a good example of this was we did an event called Keyspire for real estate investors a few weeks ago. And when we did this event, we got 250 people who wanted to book appointments with us. And so that's a lot of people to reach out to. So what we did is we sent an automated message to everybody that just essentially said, hey, you know, it's such a pleasure to connect with you here. My name is Eric Erstaff. Our people who are from our team who are outbound reaching out, once people have inbound reached us, you know, hey, how can we help you? What questions do you have? Can we set you up with our team? But instead of individually reaching out to 250 people, we set it up that they send out this automated message so that they could hit all 250 people at the same time and then start responding as people were available. It allowed us to get a really great reach out to those prospects. It allowed us to prioritize those people who had really time sensitive needs. And it also allowed us to, to create communication in a fast way that that showed everybody how much we genuinely care about supporting them. So once again, I think there's, there's a few ways that we can overcome the pain of growth. Prioritization, building a strong team, finding mentorship. Join the wealthy entrepreneur. Join our community. We've got mentorship. We're showing you how to do this based on how we've done it. So super important. Embracing a growth mindset. We focus on mindset and accountability inside our group as well. Maintaining financial discipline. You can bet your butt that we're focusing on financial objectives in there, managing stress and mental health and also leveraging technology. Guys, this has been, this topic is super, super important to me. I will and will not, I will continue to invest in growth. I will not stop. The mission that we're on to empower entrepreneurs like you with the right information so that you can make a dramatic change in the world. We want to help you. We want to help people just like you. And so we again are committed to making sure we're investing in connecting with as many of you as possible. So this is again, something that I'm committed to. You know, we, we did just this past week found out that we were one of the fastest growing companies in Canada. According to the Globe and mail number 180 to be exact. We were the number one growing CPA firm on that list in Canada. There's a lot of pride that comes with that because we, we know that that's part of our mission is to be recognized for continuous growth and evolution and it's something that means so much to every single one of us. So you can bet your butt that we're going to continue to invest in that and improving and, and we're not perfect in every way, shape or form, but we're damn well gonna die trying to be that way. So very important. Hopefully this resonates with you. Hopefully there's been some really great insights in there. If you want to learn more about the wealthy entrepreneur, it's Wealthy Entrepreneur Co is the name of our program. We would love for you to check that out and see if there's a good fit in there. If my team can support you with anything related to, you know, financial obligations, helping you build out what your future looks like. Check us out. Goverocpa CA hopefully this was super valuable, guys. If it is, leave a comment in here. Make sure you give us a follow. I want to make sure that you're here for next week when we release the next episode. But leave a comment if there's something in here that really resonated with you, that made a difference to you. Please leave a comment. These comments are so important. This. This is what drives us to create the next podcast. We've been at this for about a year and a half now. I think we've got somewhere around 70 episodes out, which is really exciting. We're still going to continue pushing this and the information and resources that we have available, but please leave those comments. If you know somebody who would benefit from hearing this today, who you know is struggling with growth and they need to come or overcome some of these challenges that they're facing, please share this episode with them. Again, we're on a mission to empower entrepreneurs with good information so that they can change the world. If this is good information to help them change the world, please share it. We want to get this message out to as many people as possible. For the rest of you, please follow. I look forward to seeing you next week. This has been the Wealthy Entrepreneur. I'm Bob Govreau. Have a fantastic day.